Rolling with the punches

Billionaires may have shed wealth during the global financial meltdown but they're snapping up the world's most expensive luxury car in record numbers.

Despite the million-dollar-plus price tags, Rolls-Royce last year posted its best sales in 18 years, selling 1212 cars globally. And the BMW-owned British brand could triple sales next year with the arrival of a new model.

The biggest challenge for Rolls-Royce, though, is not the recession but other luxury items.

"There are so many competitors for R-R that are not necessarily cars: a second car, a helicopter, replacing the yacht," Rolls-Royce chief executive Tom Purves says. "In our customers' minds those are all things that could prevail."

Or in the case of Rolls-Royce's new $700,000 baby limousine, the Ghost, it could be a watch or piece of jewellery, according to Rolls-Royce director of sales and marketing Graeme Grieve.

He says the car, due early next year, will attract new buyers, with 85 per cent of prospects new to the brand.

"(A car like this) is pocket change," Mr Grieve says. "Most of our customers will have something on their wrist that's more expensive than this. This is literally like you or me buying a digital camera."

Australian Rolls-Royce general manager Bevin Clayton expects to sell 14 new Rolls-Royces this year, despite a base model price rise from $915,000 to $1,075,000 (plus on-road costs) in response to the poor exchange rate and recent increase in luxury car tax.

As for next year, "we've got 18 firm expressions of interest" for the Ghost, he says.


"There are another 72 people who have an expression of interest but want to see it, feel it and touch it and see what the price is."

Mr Purves says Rolls-Royce is in the process of a significant model expansion.

"In 2008 we were benefiting from product investment and new product," he says. "We've also benefited from having a long order book."

He acknowledges the order book has shortened and that "2009 is fraught with challenges for everyone in the (automotive) industry".

However, that hasn't stopped the brand from predicting up to a threefold increase in sales in 2010.

"Our business is still very strong," Mr Grieve says. "We grew 20 per cent last year and are pretty much stable year-on-year at the moment."

Much of it comes down to the super-wealthy Rolls-Royce customers, most of whom own four or five cars and are willing to take risks.

"The great advantage with us in our market is that no one has really gone anywhere; no one has lost their job," Mr Grieve says. "If you're worth $1.5 billion instead of $3 billion you still go out for a meal and you still buy a car. They might have lost half the value of their assets on paper but they're pretty much looking to treble when recovery comes.

"(Many customers) are looking at the current economic situation as being a challenge and opportunity."

Social analyst David Chalke is not surprised Rolls-Royce is proving impervious to the downturn.

"Firstly, they don't actually sell a great number of cars and the people that buy them are extraordinarily wealthy and are largely unaffected (by the downturn). Their fortune may have dropped from $2 billion to $1.5 billion but that still leaves plenty for a Roller," he says.

"The effects of the downturn have been very uneven and the gap between the haves and have-nots is actually getting much greater."

He says high-flying hedge fund managers were the ones most affected by the recession and they bought "look at me" cars rather than a Rolls-Royce.

"Really, you're looking at a small group of people in the money market and they bought Porsches anyway," he says.

Rolls-Royce buyers are more likely to be self-made millionaires, possibly hard-working migrants or the sons of migrants who had set up a successful business.

That said, Mr Grieve acknowledges the financial crisis will take its toll but says the wealthiest people in the world will still be able to afford such luxury.

"The level of new interest has declined," he says. "In a lot of cases that's because they're focusing on other business interests.

"A number of customers in the US have deferred delivery. One in particular ... simply because he's busy buying properties at the moment. He said he hasn't got time because he's busy flying state to state acquiring real estate."

Ironically, it's Rolls-Royce's business model that makes it adaptable in times of a downturn. While manufacturers used to large volumes are locked in to production schedules and deals with suppliers, Rolls-Royce's low volumes can be more easily wound back.

"We have a very flexible production method," Mr Grieve says. "Our business is configured to be profitable at very low volumes. So we have the luxury in the current marketplace to take decisions other manufacturers can't."

Mr Purves is adamant there is a future for Rolls-Royce.

"We have a pinnacle position in aspiration for the automotive," he says. "I don't see a lack of aspiration in the automobile in future.

"Mobility will continue to be essential. It will continue to be offered in various different guises. It's our job to produce the pinnacle of that."

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